Emery v. Merrimack Valley Wood Products, Inc.

• Decision Date: 28 March 1983
• Docket Number: No. 82-1597,82-1597
• Parties: Leslie EMERY, Plaintiff, Appellant, v. MERRIMACK VALLEY WOOD PRODUCTS, INC., et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 985

701 F.2d 985

Leslie EMERY, Plaintiff, Appellant, v. MERRIMACK VALLEY WOOD PRODUCTS, INC., et al., Defendants, Appellees.

No. 82-1597.

United States Court of Appeals, First Circuit.

Argued Jan. 4, 1983.

Decided March 2, 1983.

As Modified on Denial of Rehearing

March 28, 1983.

Mark S. Gearreald, Exeter, N.H., with whom Shute, Engel & Morse, P.A., Exeter, N.H., was on brief, for plaintiff, appellant.

Robert W. Pillsbury, Nashua, N.H., with whom Winer, Pillsbury & Bennett, Nashua, N.H., was on brief, for defendants, appellees.

Before COFFIN, Chief Judge, BOWNES, Circuit Judge, and PETTINE, ^* Senior District Judge.

BOWNES, Circuit Judge.

Plaintiff-appellant Leslie Emery brought this diversity action against his former employers, Merrimack Valley Wood Products, Inc., and American Cabinet Corp. (jointly referred to as "Merrimack"), alleging tortious interference with his contractual relationship with Building Material Distributors (BMD). The United States District Court for the District of New Hampshire granted Merrimack's motion for summary judgment. In determining whether summary judgment is appropriate, we must "look at the record ... in the light most favorable to ... the party opposing the motion," Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962), indulging in all inferences favorable to this party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam); Santoni v. Federal Deposit Insurance Corp., 677 F.2d 174, 177 (1st Cir.1982); Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). Reversal of a grant of summary judgment is required when issues of fact which were adequately raised before the district court need to be resolved before the legal issues in the case may be decided. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-90, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968); Over The Road Drivers, Inc. v. Transport Insurance Co., 637 F.2d 816, 818 (1st Cir.1980). Because we find that this case contains "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law," Fed.R.Civ.P. 56(c), we affirm.

Emery was hired by Merrimack to sell cabinets and millwork on May 9, 1977. Three days later, he signed a comprehensive Employment Agreement, containing the following restrictive covenant which gave rise to this litigation.

10. The Salesman agrees not to be or become engaged in any competing company or industry during the term of this Agreement, except with the written consent of the Employer. If for any reason his employment or relations with the Employer shall be terminated, then he shall not, through employment with any competitive concern or industry sell to directly or indirectly, or cause to be sold, any materials to customers which the Employer has sold to within the twelve (12) months prior [to] the date of termination, for a period of one (1) year from the date of termination.

According to James V. Derderian, vice-president of Merrimack Valley Wood Products and president of American Cabinet Corp., this covenant was required only of those employees, like Emery, who required training in Merrimack's product line. The Agreement could be terminated by either party upon fourteen days written notice, and was to be governed and construed in accordance with Massachusetts law.

After two years with Merrimack, Emery was terminated because of his unsatisfactory sales performance. Within a few months of his termination, Emery was hired by BMD a division of Woodmaster, Inc. BMD, like Merrimack, sold millwork in New Hampshire, and was thus in competition with Merrimack. Emery was initially compensated at the rate of $175 per week, but plans were being developed whereby Emery would manage an expanded millwork division of BMD, and be paid a yearly salary of approximately $20,000.

Shortly after starting work with BMD, Emery met by chance Everett Shea, foreman of Chauncy Construction, at a Friendly's restaurant. Emery told Shea that he could not sell millwork to Chauncy Construction because this firm was a customer of Merrimack. Shea, however, indicated that he had not bought from Merrimack for a few months, that he was feuding with Merrimack over certain items, and that if Emery would not sell to him, Shea would buy from Diamond Lumber, another competitor of Merrimack. Emery then sold millwork, totalling approximately $4,000 to Chauncy Construction. Another customer of Merrimack, Art Vickers of A & F Construction, called Emery, not knowing that he was employed by BMD. Vickers indicated that A & F could no longer buy millwork from Merrimack because of credit problems. Emery attempted to have one of A & F's owners call Merrimack's credit manager, but eventually sold about $8,000 worth of BMD millwork to A & F.

During September and October of 1979, Derderian received information from one of Merrimack's sales representatives, Steven Bogosian, that there had been contact between Emery and certain customers of Merrimack whom Emery had serviced while employed by Merrimack. Derderian consulted with Merrimack's counsel, John A. James, Jr., who on October 23, 1979, sent a letter (the "James" letter) to the President of BMD's parent company. This letter stated in pertinent part:

It has come to our attention that you have employed one Leslie R. Emery of Freemont, New Hampshire as a salesman. It has also come to our attention that Mr. Emery has been contacting and selling building products to customers of my clients.

Mr. Emery is presently under an employment agreement which prohibits him from soliciting business from customers of Merrimack Valley Wood Products, Inc. and American Cabinet Corporation for one year after the date of the termination of his employment.

You are hereby advised that it is my present intention to take all necessary stemps [sic] to prevent your intentional interference with the contractual relationship between Mr. Emery and my clients.

Please have your representative call me as soon as possible.

Upon receiving this letter, BMD gave Emery two weeks to try to resolve his problem, and suggested contacting Merrimack. Emery called Derderian, asking if some arrangement could be made so that Emery could return to work with BMD. According to Emery, Derderian responded, "No, that's tough. You signed the contract, and that's got to be the way." ¹ Emery then contacted Attorney James, who said that he would contact Derderian. Emery again contacted Derderian and was told that James had not spoken with Derderian and that "things would definitely not change." Because Emery had not been able to come to an agreement with Merrimack, BMD terminated Emery, informing him, however, that "[a]s soon as you clarify it [the effect of the covenant not to compete], call us and we will resume where we left off, but until then we can't do anything." ²

Emery filed a diversity action in April 1980, alleging that Merrimack had intentionally and maliciously interfered with his existing and prospective contractual relations. Such a tort action is recognized in New Hampshire, ³ with the courts adopting the view set forth in the Restatement (Second) of Torts Sec. 766 (1977). Montrone v. Maxfield, 449 A.2d 1216, 1217 (N.H.1982); Baker v. Dennis Brown Realty, Inc., 121 N.H. 640, 433 A.2d 1271, 1273-74 (N.H.1981); Hangar One, Inc. v. Davis Associates, Inc., 121 N.H. 586, 431 A.2d 792, 794 (N.H.1981); Bricker v. Crane, 118 N.H. 249, 387 A.2d 321, 323 (N.H.1978); Griswold v. Heat, Inc., 108 N.H. 119, 229 A.2d 183, 187 (N.H.1967); Russell v. Croteau, 98 N.H. 68, 94 A.2d 376, 377 (N.H.1953). To prove a tortious interference, a plaintiff must show that (1) the plaintiff had an economic relationship with a third party; (2) the defendant knew of this relationship; (3) the defendant intentionally and improperly interfered with this relationship; and (4) the plaintiff was damaged by such interference. It is clear that Merrimack intentionally interfered with Emery's relationship with BMD. The issue is whether such interference was proper. Or, to put it another way, whether Merrimack's action in sending the James letter was either privileged or otherwise justified under the circumstances. Baker v. Dennis Brown Realty, Inc., 433 A.2d at 1274; Bricker v. Crane, 387 A.2d at 323; Wilko of Nashua, Inc. v. TAP Realty, Inc., 117 N.H. 843, 379 A.2d 798, 801-02 (N.H.1977); Morra v. Hill, 103 N.H. 492, 175 A.2d 824, 826 (N.H.1961); Huskie v. Griffin, 75 N.H. 345, 74 A. 595, 596 (N.H.1909). The Restatement (Second) of Torts Sec. 767, supra, sets out a number of factors which must be considered in determining whether an intentional interference is also improper. The Restatement also contains specific provisions which deal with narrow situations in which the application of the Sec. 767 factors has produced more clearly articulated standards. Applicable here is Sec. 773 which provides:

One who, by asserting in good faith a legally protected interest of his own or threatening in good faith to protect the interest by appropriate means, intentionally causes a third person not to perform an existing contract or enter into a prospective contractual relation with another does not interfere improperly with the other's relation if the actor believes that his interest may otherwise be impaired or destroyed by the performance of the contract or transaction.

To prevail on this affirmative defense, a defendant must prove that (1) it has a legally protected interest; (2) it made a good faith threat to protect this interest; and (3) it acted by appropriate means. Id. comment a. If these three criteria are satisfied, an intentional interference will be permissible. We proceed to analyze Merrimack's action in light of these three factors.

I. Legally Protected Interest

Merrimack asserts that the covenant not to compete...